Tuesday, January 15, 2019

Is it time to finally bid goodbye to the traditional method
of selling homes along with its standard, six-percent commission?

After many
years of impacting the fields of retail, travel, stock trading and others,
technology is now increasingly poised to change how both new and existing homes
are bought and sold. While there will probably always be a market for
traditional agents, only those with area expertise and excellent customer
service will survive in this new marketplace.

When Jack Ryan, a former Goldman Sachs partner and
technology investor, went to sell his Southern California home to an interested
party in 2015, he contacted his local real estate agent who would help him
complete the paperwork – for six percent of the sales price. Frustrated with
this response and hiring an attorney instead for a small fee, he soon
co-founded Real Estate Exchange (REX), which uses artificial intelligence (AI),
machine learning and big data to match buyers and sellers for just a two-percent
commission.

Unlike competitors such as Redfin and PurpleBricks, which
discount the listing fee but still require sellers to offer a buy-side
commission, REX bypasses the MLS entirely, thus cutting out three percent of
the equation. For those buyers who insist that their agent receive a cut, it
can still be negotiated with the seller, or the buyer can roll the cost onto
their own mortgage. Should anyone experience buyer’s remorse, REX even offers a
30-day, money-back guarantee.

For those sellers looking for a faster route, “iBuyers” such
as Redfin Now, Zillow Offers, OpenDoor, OfferPad, and Perch provide what is
often a below-market cash offer in exchange for an almost-immediate sale. While
Zillow expressly encourages sellers to bring in their own professional agent, the
others close the deal mostly in-house. For this convenience, they charge
overall fees ranging from six to 13 percent, depending on the strength of the
market and the condition of the property.

Coldwell Banker, in partnership with Home Partners of America,
is leveraging the rent-to-own giant’s subsidiary, cataLIST, for cash offers to
sellers in select markets. If the seller turns down the offer as too low, then
the home is still marketed as a traditional listing.

For larger new home builders, NewHomeSourceProfessional, a
unit of Builders Digital Experience (BDX), specifically partners with buyer’s
agents to help its builder members move inventory to a digital audience. Billed
as an “MLS for new homes” and free to agents, the system not only regularly scrapes
builders’ websites for pricing and inventory changes, but can also pull
specific information about floor plans, school districts and other community
information.

Going one step further and leveraging the power of AI, last
year BDX also unveiled HomLuv, which allows buyers to review and rank more than
one million images from 100,000 different new homes. As buyers pin their
favorites, the system learns their preferences and begins matching them with
participating builders for their locations of interest.

For smaller and custom home builders, Edgewise Realty is
another option which offers a closer, direct-to-buyer partnership similar to
REX, which also allows clients to reserve units with just a $1,000 deposit,
upload financial documents, and make choices about features and upgrades.
Currently working with about 30 different builders across the country and
charging a flat one-percent listing fee, Edgewise buyers can also get regular
updates with photos and videos.

But what if a potential buyer first has a home to sell?

To
address that situation, BDX has teamed up with Keller Williams International in
multiple U.S. markets for its New Home Ambassador and National Builder Trade-in
programs. Although the ambassador program allows agents to create a separate and
personally branded website to search new home listings, the trade-in program
charges a discounted, three- to four-percent commission while still offering
the expertise of professional stagers and agents, and even lease buy-out
programs for renters.
Meanwhile, upstart Knock has another strategy appealing to
builders, which is to purchase a seller’s chosen new home for cash -- often at
a discount -- and then sell the old home the traditional way. Only when the old
home escrow closes do the buyers receive title to the new one.

Similarly, Ribbon finds buyers first, and then offers
sellers a competitive, all-cash bid for a commission of 1.95 percent. With
Ribbon, buyers can even rent out their new homes at market rates until they’re
able to obtain a suitable mortgage, whereas if a Knock listing is taking too
long to sell, it can also be temporarily converted to an income property.